What You Can Learn from a Wealth Advisor: Michael Evans' Story, Part One

What You Can Learn from a Wealth Advisor: Michael Evans’ Story, Part One

You want to be an informed and educated investor. You listen to the market news on the way home from work. You look at the reports from your 401(k). You read as much as you can on the Internet. But you may be missing out on an important source of knowledge: your wealth advisor.

Sometimes people are afraid to talk to their wealth advisor. They feel inadequate. Nervous. Worried. But if you don’t know your wealth advisor’s history and philosophy, their approach and goals might not align with your own. That’s why Cogent wanted you to hear Michael’s story and the challenging life lessons he has learned about managing money—and hear it in his own words.

Learning from a Wealth Advisor: The Early Years

Think back to October 13, 2000 – the dawn of the new millennium. My wife and I had two young children at home and were expecting our third. We were plenty busy every waking hour, and we spent far more hours awake than asleep.

I was thriving as a local commodity trader at the Chicago Mercantile Exchange (CME). This was back before the loud trading floor had been replaced by the silent stealth of electronic trading. It was possible to make startling sums of money incredibly quickly. It was equally possible to lose even more, even faster. The daily stress was palpable.

Admittedly, I relished the chase, energized by the physical, competitive nature of the pits. To succeed, I didn’t have to be right all of the time. I just had to be right more often than not. Most days, enough days, I returned home tired but satisfied.

Still, an ongoing tug-of-war ate at my satisfaction. To succeed, I had to take enormous concentrated risks with my own assets, placing thousands of trades, every minute of every trading day, always on margin. At the same time, I needed to save and preserve assets for my family. Often, these interests would be at odds with each other.

So I worried. I worried about whether I could withstand the pressure. I worried I might make a mistake. I worried something unpredictable would happen that would be out of my control. Most of all, I worried whether I’d arranged our personal finances – my family’s investments and reserve funds – to sustain us, no matter what.

Then one day, Friday, October 13, 2000, one of my greatest worries came horrifyingly true.

Learning from a Wealth Advisor: Michael’s School of Hard Knocks

It was a mild fall day in Chicago at the end of a pretty good trading day. As usual, when I got home, I fired up our home computer to check our personal portfolio. Just a quick look-see.

What I saw, puzzled me. One of the “safest” funds we owned, the Heartland Short Duration High Yield fund, displayed a huge loss. Almost half of its value had disappeared overnight.

My first reaction was: This must be a mistake, a computer glitch, right? After all, this was our reserve fund – the money that wasn’t ever supposed to be put at risk. The company’s literature described the fund as being as safe as a checking account.

Imagine my panic when I discovered it was no glitch. The loss was real. I’d been sucker punched in the gut. As later reported in the Los Angeles Times, the manager had over-concentrated in healthcare and multifamily housing bonds. They had to abruptly “recalculate” the fund’s worth after having misreported its true underlying value. The event was literally unprecedented in the municipal bond market, at least at that time.

Learning from a Wealth Advisor: Michael’s Epiphany

The experience was awful for my family and me. Just as painful, I soon learned that most of the fund’s shareholders were teachers, public service retirees, and other everyday investors whose life savings had vanished in what amounted to a collapsed Ponzi scheme. Heartland’s actions were so egregious that its chief executive and six other executives later settled charges with the U.S. Securities and Exchange Commission pertaining to their mismanagement of the fund; they paid a fine of $3.5 million and incurred other civil penalties to resolve the government’s allegations.

I know this because I agreed to act as lead plaintiff in a class-action suit, dedicating seven years of my life trying to recover as much money as we could from the fund, its managers, and even its auditors (who had looked the other way as the meltdown occurred).

My initial impetus was to recover what we could, while taking steps to ensure this would never happen to my family ever again. Ever!

Along the way, I discovered something else about myself that became a driving force behind the rest of my career. I realized how intensely rewarding it was to help my fellow shareholders. As lead plaintiff, you must make informed decisions that affect everyone – gathering information from a wide and diverse team; acting on behalf of everyone else in the class; and above all, doing what’s best for everyone (even if it’s not necessarily the best for yourself).

It was a humbling honor to be in this position. The early experience became the epiphany in my life that led me to become a fee-only, fiduciary wealth manager. Just as I had experienced in that class action suit, I wanted to always be sitting on the same side of the table as my clients, with similar skin in the game.

Learning from a Wealth Advisor: Evidence-Based Inspiration

Having my clients’ best interests at heart was a good start. But my journey toward being a fiduciary advisor was not yet complete. I also had to have the knowledge to ensure my advice was worth heeding. For that, I still needed to stop following financial forecasts peddled by the likes of the Gloom, Boom & Doom Report, and embrace the important lessons about prudent money management and informed risk-taking. How did I make the change? Watch for my next post, when I’ll complete my personal tale of transition.

If you want to talk to Michael and the rest of the Cogent team about your investments or other financial goals, please call us today. Our wealth advisors are ready to help, no matter where you are in your wealth building. We want you to avoid Michael’s mistakes and get a solid financial plan in place so you can enjoy the future you’ve always wanted.

The opinions expressed by featured authors are their own and may not accurately reflect those of Cogent Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.